The Libertarian

Vin Suprynowicz

THE DESPERATE COUNTERATTACK ON 'OWNERSHIP'

Congresswoman Shelley Berkley
brought U.S. Rep. John Spratt, Democrat of the 5th District of South Carolina,
to town last week to explain her party’s objections to the Bush plan to “allow”
wage-earners to place 4 percentage points -- about one third -- of their Social
Security levies into privately owned (though government supervised) retirement
accounts.

The ranking minority member of the House Budget Committee, attorney Spratt is
“the best we’ve got” at explaining the Democratic position on the issue, Ms.
Berkley told me.

Rep. Spratt’s main objection to the plan is that it will “divert” taxes from
younger workers, which currently go directly to paying the Social Security
benefits of older retirees.

(No, they are neither “invested” nor locked in some vault to await the day
you retire. If they were, what would become of the loot in the “accounts” of
those who die at age 64? It would go to their widows, of course. In fact, the
survivors get hardly enough to buy a vase of flowers, because there is no money
in those “accounts.”)

Upon retirement, younger workers who opt to take part in the private accounts
will have to “pay back” that money to the Social Security trust fund -- plus
interest at 3 percent above inflation -- negating most of the purported benefits
of the plan, Rep. Spratt told the Review-Journal editorial board in a meeting
Tuesday.

It’s a pretty sobering picture Congressman Spratt paints -- a new retiree
having to sit down and write a huge check to the Social Security “Trust Fund”
when he turns 67. Asked for details about how that would work, Rep. Spratt’s
press guy in Washington, Chuck Fant, e-mailed me a Jonathan Weisman article
which ran in The Washington Post on Feb. 4, explaining this so-called “clawback”
arrangement.

The problem is, Mr. Weisman of the Post actually wrote on Feb. 4: “The
Washington Post incorrectly reported Thursday that the balance of a worker’s
personal account would be reduced by the worker’s total annual contributions
plus 3 percent interest. In fact, the balance in the account would belong to the
worker upon retirement, White House officials said. “ ‘Individuals get to keep
everything they set aside in personal accounts, plus the increased rate of
return they’ll realize on their investment,’ White House spokesman Scott
McClellan said. ‘So to suggest otherwise is wrong. It is the individual’s
account, and the government cannot touch it.’ ”

“Why that’s being perpetuated after the Post ran a correction I don’t know,”
Mary Diamond of the Treasury Department told me Wednesday.

Under the Bush plan, retirees who have opted to participate in the private
accounts would own all the money in the private accounts, and would not have to
“pay anything back” to anyone, Mark Warshawski, assistant Treasury secretary for
economic policy, confirmed for me Wednesday.

True enough, since these workers will have been “contributing” one third less
to the Social Security system, they will receive lower Social Security pay-outs,
Mr. Warshawski confirmed. But “It’s not according to how well you did with your
private account. The way it works is it’s your voluntary choice if you want to
be in a PRA -- we think many people will do that. Then when you retire you get
retirement benefits from the PRA plus from Social Security, but the Social
Security benefit is reduced by an offset rate, it’s reduced by the amount of the
contributions made to the PRA, plus interest at 3 percent real plus inflation”
-- “compensating” the government for what it could have made by investing those
sums in T-bills.

“It’s an offset, it’s not a clawback. Your PRA is not reduced; that’s a
mistake and the Post corrected it.”

“This is in no way a loan,” Robert Pozen, an investment executive who served
on the president’s 2001 Social Security commission, explained to the Post in
February.

Even Rep. Spratt projects that the apparently small sums diverted into
private accounts will earn such a vastly greater return that -- compounded --
they will soon make up the bulk of the average retiree’s pension payments.

Given how well the federal government keeps its other promises -- and the
fact that Washington will eventually collapse and fail to keep its
promises, just as Rome did -- I know I’d feel a whole lot better if the
bulk of my retirement income were coming from a fund I owned privately, rather
than an ongoing shakedown mechanism subject to the political whims of the
Congress or the willingness of the younger generations to keep me in Scotch and
cigars.

But to the Democrats, of course, such a change would be bad, since it would
reduce their ability to redistribute wealth at retirement from those who do a
lot of valuable and well-compensated work, to those who do not.

If the Bush plan goes through, Social Security will no longer be “the
foundation on which people retire,” Rep. Spratt complained last week. Once
private accounts are allowed, the congressional income transfers from rich to
poor will inevitably become no more than “a small supplement.”

But wasn’t that the original intent -- for the government program to be
merely a supplement, I asked.

Rep. Spratt, whose ignorance of the history of the program he came here to
discuss is astonishing, said he did not know. (He did not even know that the
program was voluntary for participants when introduced in 1935. Gee, I wonder
why Treasury Secretary Morgenthau had Walt Disney gin up that special Donald
Duck cartoon for theatrical release during the war years, urging home-front
workers to sign up for payroll withholdings, if they were mandatory?)

But what the old-line socialists like Rep. Spratt (he used the word
“socialism” himself, to explain his own Democratic plan to increase the rate of
return of the “Trust Fund”) really hate about the modest Bush plan is that it
will limit their ability to make lower-wage workers feel beholden to them for
redistributing to them the earnings of others. The benefit of the current
set-up, Rep. Spratt explained, is the ability of the politicians to “guarantee
the lower-wage earner a dignified retirement.”

(Apparently it’s “dignified” to live off money looted from those who
qualified for better jobs and worked hard for 50 years, so long as the armed
robbery is committed for you by Rep. Spratt and his pals.)

But what if one does fare poorly with a private account, earning no better
return than the current “Social Security” scheme (which would take some doing)?

A White House official, speaking on condition of anonymity, told the Post
last month “Even if I break even, we would argue I’m still better off because I
own the money. If I die, it belongs to my estate. If I divorce, it’s a marital
asset. And it’s protected from political risk. Government can’t take it away.”

Next time: The Democratic alternative.
Given how well the federal government keeps its other promises -- and the fact that Washington will eventually collapse and fail to keep its promises, just as Rome did -- I know I’d feel a whole lot better if the bulk of my retirement income were coming from a fund I owned privately, rather than an ongoing shakedown mechanism subject to the political whims of the Congress or the willingness of the younger generations to keep me in Scotch and cigars.

But to the Democrats, of course, such a change would be bad, since it would reduce their ability to redistribute wealth at retirement from those who do a lot of valuable and well-compensated work, to those who do not.

If the Bush plan goes through, Social Security will no longer be “the foundation on which people retire,” Rep. Spratt complained last week. Once private accounts are allowed, the congressional income transfers from rich to poor will inevitably become no more than “a small supplement.”

But wasn’t that the original intent -- for the government program to be merely a supplement, I asked.

Rep. Spratt, whose ignorance of the history of the program he came here to discuss is astonishing, said he did not know. (He did not even know that the program was voluntary for participants when introduced in 1935. Gee, I wonder why Treasury Secretary Morgenthau had Walt Disney gin up that special Donald Duck cartoon for theatrical release during the war years, urging home-front workers to sign up for payroll withholdings, if they were mandatory?)

But what the old-line socialists like Rep. Spratt (he used the word “socialism” himself, to explain his own Democratic plan to increase the rate of return of the “Trust Fund”) really hate about the modest Bush plan is that it will limit their ability to make lower-wage workers feel beholden to them for redistributing to them the earnings of others. The benefit of the current set-up, Rep. Spratt explained, is the ability of the politicians to “guarantee the lower-wage earner a dignified retirement.”

(Apparently it’s “dignified” to live off money looted from those who qualified for better jobs and worked hard for 50 years, so long as the armed robbery is committed for you by Rep. Spratt and his pals.)

But what if one does fare poorly with a private account, earning no better return than the current “Social Security” scheme (which would take some doing)?

A White House official, speaking on condition of anonymity, told the Post last month “Even if I break even, we would argue I’m still better off because I own the money. If I die, it belongs to my estate. If I divorce, it’s a marital asset. And it’s protected from political risk. Government can’t take it away.”